Custom, Excise & Service Tax Tribunal
Tops Security Ltd. vs Cce Nagpur on 28 September, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT No. I
APPEAL Nos.
ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724
,731,732/2012,87575/2015
(Arising out of Orders-in-Original No. 07/2010/C dated 27.1.2010
passed by Commissioner of Central Excise, Nagpur, No.21-
22/Service Tax/Commissioner/2010 dated 27.7.2010 passed by
Commissioner of Central Excise, Aurangabad,
No.2/Commissioner/Goa/ST/7/10-101 dated 29.10.2010 passed by
Commissioner of Central Excise, Goa, No.2/ST/SB/2011 dated
20.12.2011 passed by Commissioner of Service Tax, Mumbai,
Order-in-Appeal No. AGS(27)157/2012 dated 6.2.2012 passed by
Commissioner of Central Excise (Appeals), Aurangabad, Order-in-
Original No. 53/ST-II/WLH/2012 dated 1.1.2012, No. 10-12/STC-
I/SKS/12-13 dated 18.5.2012, No.13-15/STC-I/SKS/12-13 dated
8.8.2012/30.6.2012 passed by Commissioner (ST), Mumbsai-I and
Order-in-Appeal No. GOA-EXCUS-000-APP-031-2015-16 dated
1.9.2015 passed by Commissioner of Central Excise (Appeals),
Pune-II)
Tops Security Ltd. Appellant
Joseph George
Diwan Rahul Nanda
Ramesh Iyer
Vs.
Commissioner of Central Excise/Service Tax, Respondent
Nagpur/Aurangabad/Mumbai-II/IV, / Goa Appearance:
Shri Keyuri Desai, Advocate, for appellant Shri Roopam Kapoor, Commissioner (AR) and Shri M. Suresh, Deputy Commissioner (AR), for respondent CORAM:
Hon'ble Dr. D.M. Misra, Member (Judicial) Hon'ble Mr. Sanjiv Srivastava, Member (Technical) Date of Hearing: 12.7.2018 Date of Decision: 28.9.2018 ORDER No. A/87497-87513/2018 ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 2 Per: Sanjiv Srivastava Appellants herein are providing taxable services classifiable under the category of "Security Agency Services" as defined under section 65(94) of the Finance Act, 1994. They are also providing "Commercial Training and Coaching" services as defined under Section 65(105)(zzc) read with Section 65(27) of Finance Act, 1994. Appellants were providing these services through their branch offices located all over the country (More than 35 branch offices).
2.1 As a result of investigation under taken by Director General Central Excise Intelligence it was found that Appellants were charging service tax from their customers, and the amounts received by them were inclusive of service tax. The payment was received at the branch level which was deposited in their centralized account in Corporation Bank. The amount received against the services provided by the appellant is also reflected in the book of accounts of the Appellant. However service tax paid by the appellant was not commensurate with the amounts received during the corresponding periods. Investigations were conducted and the statements of concerned persons were recorded.
ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 3 2.2 Show cause notices were issued to the respective branch offices of the Appellants demanding the service tax charged and collected from their customers/ clients, but not deposited with the government. The show cause notices also proposed penalties under Section 76, 77 &
78. Penalties were proposed on the concerned persons. 2.3 The show cause notices have been adjudicated by the concerned commissioners confirming the demand of taxes due and imposing the penalties. The details of the said order and appeals filed are indicated in table 1- Table 1- Details of Order in Original and Appeals Filed Appeal No ST/342- Order in Original No 344/10-MUM 07/2010/C dated 27.01.2010 Period 2004-05 to 2008-09 Branch Nagpur Demand of Service Rs 2,29,98,633/-
Tax Penalty Section 76 Rs 2,29,98,633/- or Rs 100/ Day or Rs 200/ day or 2% Per month (whichever is higher) Penalty Section 77 Rs 5000/- on Diwan Rahul Nanda and Rs 5000/- on Joseph George Penalty Section 78 Rs 2,29,98,633/-
Appeal No ST/559- Order in Original No 21-
561/10-MUM 22/Service Tax/Com/2010
dated 27.01.2010
Period 2004-05 to 2008-09
Branch Aurangabad
Demand of Service Rs 1,10,88,511/-
Tax
Penalty Section 76 Rs 7,00,000/- + Rs 15,00,000/- Penalty Section 77 Rs 5000/- on Diwan Rahul Nanda and Rs 5000/- on Ramesh Iyer Penalty Section 78 Rs 75,53,400/- + Rs 35,35,111/-
Appeal No Order in Original No
ST/63/10-MUM 2/Comr/Goa/ST/7/2010
dated 29-October-2010
Period 2004-05 to 2007-08
Branch Goa
ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 4 Demand of Service Rs 56,30,458/-
Tax Penalty Section 76 0 Penalty Section 77 100,000/- on Diwan Rahul Nanda Penalty Section 78 Rs 56,30,458/-
Appeal No Order in Original No
ST/128/12-MUM 02/ST/SB/2011 dated 20-
December-2011
Period 2004-05 to 2008-09
Branch Thane
Demand of Service Rs 3,75,69,038/-
Tax
Penalty Section 76
Penalty Section 77 Rs 1000 + Rs 1000/- on Diwan Rahul Nanda Penalty Section 78 Rs 3,75,69,038/-
Appeal No Order in Original No
ST/326/12-MUM PI/Comr/ST/08-09/127 dated
13-February-2012
Period 2004-05 to 2009-10
Branch Pune
Demand of Service Rs 9,90,57,772/-
Tax
Penalty Section 76
Penalty Section 77
Penalty Section 78 Rs 9,90,57,772/-
Appeal No Order in Original No
ST/334/12-MUM AGS/(27)157/2012 dated 06-
February 2012
Period 2009-10
Branch Aurangabad
Demand of Service Rs 22,59,508/-
Tax
Penalty Section 76
Penalty Section 77 Rs 200/- per day or 2% (whichever is higher) Penalty Section 78 Appeal No Order in Original No 53/ST-
ST/564/12-MUM II/WHL/2012 dated 10-May- 2012
Period 2010-11 Branch Kalamboli Demand of Service Rs 1,77,80,402/- Tax
Penalty Section 76 Rs 200/- per day or 2% (whichever is higher) Penalty Section 77 Rs 5,000 + Rs 5000/- on Diwan Rahul Nanda Penalty Section 78 Rs 1,77,80,402/-
Appeal No Order in Original No 10- ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 5 ST/622/12-MUM 12/STC-I/SKS/12-13 dated 18-May-2012 Period 2004-05 to 2010-11 Branch Lower Parel Demand of Service Rs 11,74,25,613/-
Tax Penalty Section 76 Rs 4,94,89.037 +Rs 81,07,430 + Rs 2,27,31,990 Penalty Section 77 Rs 15,000 + Rs 5000/- on Diwan Rahul Nanda Penalty Section 78 Rs2,50,00,000+ Rs 2,50,00,000+ Rs 2,20,00,000 Appeal No Order in Original No 13-
ST/723.724,731 & 15/STC-I/SKS/12-13 dated 732/12-MUM 30-June 2012 Period 2004-05 to 2010-11 Branch Saki Naka Demand of Service Rs 1,57,99,282/- Tax
Penalty Section 76 Rs 5,99,07,443+Rs 2,25,32,667+ Rs 52,80,273/-
Penalty Section 77 Rs 15,000 + Rs 5000/- on Diwan Rahul Nanda Penalty Section 78 Rs 10,02,00,000/- + Rs 4,02,00,000/-
Appeal No Order in Original No GOA-
ST/87575/15-MUM EXCUS-000-ADC-016-13-14 dated 28-January-2014 Period 2010-11 Branch Goa Demand of Service Rs 33,44,023 Tax Penalty Section 76 Rs 200/- per day or 2% (whichever is higher) Penalty Section 77 Penalty Section 78 2.4 Aggrieved by the orders as detailed above, Appellants have filed these Appeals. 3.1 Matter has been posted for hearing quite a number of times and most of the times representative of counsel (Ms Keyuri Desai, Advocate) for the appellant ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 6 sought adjournment. Details of such requests are listed in table 2 below:
Table 2: Details of Records of Proceedings Date of Record of Proceeding Hearing 12/3/2015 Adjourned to 8/5/2015, as Mr Mishra (Counsel) is not well 8 & No division Bench adjourned to 11/05/2015 7/7/2015 7/7/2015 Adjourned to 26/8/2015, as prayed by appellant counsel vide letter dated 2/7/2015 26/8/2015 Adjourned to 4/11/2015 on request of Counsel 4/11/2015 Not reached, Adjourned to 19/1/2016 19/1/2016 No division bench, Matter adjourned to 3/3/2016.
3/3/2016 Adjourned to 12/4/2016 as a last chance.
12/4/2016 Time over matter adjourned to 26/5/2016.
26/5/2016 Adjourned to 02/6/2016 with all other appeals as per list submitted by both sides.
2/6/2016 Adjourned to 14/7/2016 on Revenues request. AR to submit the verification report of payment particulars.
14/7/2016 Adjourned on request of appellant due to ill health of Consultant, List on 2/9/2016 2/9/2016 Time over, matters adjourned to 20/10/2016 20/10/2016 Time over matter adjourned to 7/12/2016 7/12/2016 Adjourned to 15/2/2017 15/2/2017 Miscellaneous Application allowed only for raising the point of limitation, To be continued on 24/12/2017 24/2/2017 No bench Matter adjourned to 22/3/2017 22/3/2017 No bench Matter adjourned to 5/5/2017 5/5/2017 Adjourned to 12/6/2017 on Appellants request 12/6/2017 No bench Matter adjourned to 18/7/2017 18/7/2017 On request of Appellants representative, adjourned to 20/7/2017.
ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 7 20/7/2017 Miscellaneous Application filed by the Appellants is allowed for raising the point of limitation. Following has been recorded in order No M/88601/1/ST dated 20.07.2017 while disposing the Miscellaneous Application.
"3. It may be stated that a litigant is entitled to raise point of law at any stage of litigation. Appellant admitted his liability for which calculation aspects can be reconciled as pleaded by it with the learned D R in the office of Commissioner (AR) during next week, There is no objection from revenue to undertake such verification.
4. Appellant is directed to report to the office of the learned Commissioner (AR) on Monday i.e. 24.07.2017 and submit a reconciliation statement for examination. The reconciliation report shall reach the tribunal by 08.08.2017 from the learned DR for disposal of the Appeal since the appellant has grievance that it is suffering from financial hardship.
5. With the above direction, the miscellaneous application is disposed and the appeal will be taken up on 08.08.2017."
08/08/2017 Appellant to submit all details as called for by the order dated 20/07/2017 to the officer of Learned Commissioner (AR) for reconciliation by 31.08.2017 and report to Tribunal. Call on 31.08.2017.
31/08/2017 Call on 4/9/2017 as prayer of Sri Tahir Parande (Proxy Counsel for Appellant) that Sri C A Bihari is suffering from Dengue.
4/09/2017 No bench. Matter adjourned to 28/09/2017.
28/09/2017 Miscellaneous application filed was dismissed, vide order No M/89963- 89964/17/STB, stating as follows:
"Appellant is not at all co-operative to examine its averment in miscellaneous to examine its averment in miscellaneous applications. Accordingly MA/927732 & 927733/17 are dismissed."
10/10/2017 Time over matter adjourned to ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 8 07/11/2017 07/11/2017 Adjourned to 20/11/2017 20/11/2017 Time over matter adjourned to 20/12/2017 20/12/2017 No Division Bench matter adjourned to 02/02/2018 02/02/2018 No Division Bench matter adjourned to 07/03/2018 7/3/2018 Matters are Adjourned to 12/04/2018 as per request of advocate 12/4/2018 Matters are Adjourned to 12/04/2018 as per request of advocate 28/6/2018 Adjourned to 12/7/2018 at the request of Learned Advocate, that Shri Bihari's wife is suffering from cancer.
12/7/2018 Judgment reserved. Written submissions be submitted in a weeks' time.
4.1 When the matter was listed on 12/04/2018, 28/6/2018 and 12/07/2018, Ms Keyuri Desai Advocate had appeared on the behalf of Appellants. She has submitted during the arguments that they have deposited the entire amount of tax due from them, and were not in agreement with the reconciliation undertaken by the department and invited the attention to letter dated 31.01.2018 whereby they have submitted that -
i. For determining the service tax liability in above appeals where the department has not considered the challans of payment as per enclosed letter and list of challans was annexed. This list was filed by them with the Principal Commissioner of Service Tax vide their letter dated 14.11.2017 ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 9 ii. For adjustment of excess service tax amount u/s 87(b) by the department against interest liability. (As per enclosed letter dated 04/12/22017 filed with Principal Commissioner of Service Tax). She submitted that if all the payment made by them is taken into account then entire demand confirmed against them has already been paid. Hence no demand can be sustained against them.
4.2 In their appeals, arguments and written submissions, appellants have raised following questions for consideration.
i. Whether penalty under section 76 or Section 78 of the Finance Act, 1994 is sustainable, in case where the entire amount of service tax payable has been reflected in the ST-3 returns filed from time to time and substantial amount of service tax has been deposited and the delay was owing to acute financial crisis of non receipt of consideration from the parties to whom security guards were deployed;
ii. Whether impugned orders are correct and justified when the deposits made towards service tax, either after issue of show cause notice or before passing impugned orders or after passing impugned orders, but before filing of appeal, in a ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 10 case where, after consideration of deposits made from time to time, the liability of service tax would be Nil and/ or marginal amounts.
4.3 Appellants have in their appeal argued that during the period under consideration they were facing acute financial hardship and hence were not in position to deposit the service tax due from them by the appointed day. However they had deposited the entire service tax due from them albeit after some delay. 4.4 While passing the said orders adjudicating authorities have failed to take into consideration the deposits made by them towards the discharge of service tax liability through cash payments and by debits in CENVAT account, and have confirmed the entire demand of tax against them.
4.5 Adjudicating authorities have passed the said orders without taking into consideration the acute financial hardships being faced by them for which they were not in position to deposit the tax by appointed day. 4.6 Certain portions of the demands were time barred as they were clearly showing the details of payments received service tax due thereon and service tax deposited by them in their ST-3 returns filed by them from time to time.
ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 11 4.7 Since they were operating from more than 35 branch offices. Each branch was raising bills and collecting the payments. Their client base is wide spread and there is also overlap of the jurisdictions of the branch office. A sometimes payment against some bill raised by a branch office is also received in some other branch office. All these factors have contributed to delay in payment of service tax. Also on account of delay in receipt of payments from their clients, and acute financial hardship on this account was responsible for delay in payments.
4.8 Demands have been worked out erroneously and cannot be justified. Till 01.04.2011, the service tax was payable on the amounts received and not on the amounts billed. The show cause notices and the orders have proceeded on the basis of the billed amount and not on the basis of amounts received hence the basis for the entire demand is flawed.
4.9 In some instances there is duplication of demand. 4.10 Penalties under section 76 are not sustainable as there was no failure in making the deposit of service tax. In their case they had been depositing the service tax partially and were not paying the tax regularly. In ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 12 such a case the provisions of Section 76 do not get attracted as has been held by the following decisions- i. Motor World [2012 (27)STR 225 (Kar)] ii. Jivant Enterprise [2012 (28) STR 582 (T)] iii. Smitha Shetty [2003 (156) ELT 54 (T)] 4.11 Penalties under section 78 too are not sustainable for the reason that there has been no short levy or non levy etc, on account of any grounds envisaged under proviso to Section 73 of Finance Act, 1994. From the submissions made by them it is quite evident that there was no suppression of facts, mis declaration etc. on their part and hence such penalties cannot be justified. 5.1 Shri Roopam Kapoor, Commissioner, Authorized representative submitted that as directed by the bench vide its order dated 20/07/2017, the exercise of reconciliation of payment had been undertaken. As per the exercise undertaken, it is evident that appellants have short paid the tax. Even in the documents produced by the appellant, for payment of the taxes due, do not inspire confidence, as the challan produced do not bear the stamp etc, of the bank in which the said amounts have been deposited. The bank statements etc. are not the proper documents for payment of taxes. He submitted that Appellants had been collecting the tax amount from their customers but not depositing the ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 13 same as provided in law. It is also an admitted fact that appellants had not filed the ST-3 return in time as provided by law. But not for the investigations undertaken by DGCEI, appellants the fact of non deposit of the amounts collected as tax would never be unearthed. He concluded by stating that the penalty's have been correctly imposed on the Appellant for their act of not depositing the tax in time. He also submitted that on the basis of investigations undertaken by DGCEI the show cause notices have been issued to various branch offices of the Appellant across the country. In the Appellants own case, on the basis of same facts and same investigation CESTAT Delhi bench has already upheld the demands and penalties imposed as per the decision reported in 2016 (41) S.T.R. 634 (Tri.
- Del.). He also relied upon the Decision of Delhi High Court, wherein the High Court has not only upheld the imposition of mandatory penalty upon the Appellant, but has held that tribunal could not have allowed the option of payment of 25% of the mandatory penalty, as has been allowed by tribunal in the above referred decision [2016 (41) S.T.R. 612 (Del.)]. He argued for dismissal of all the appeals 5.2 In their submissions made revenue has contended as follows-
ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 14 i. Sum of the demand confirmed involves about Rs 31.8 Crores in all the appeals under consideration. The appellants have defrauded the government of its legitimate revenues. ii. The case is not the case of late filing of returns as has been made out by the appellants, but a deliberate attempt to defraud the government of its legitimate due. In the scheme of indirect taxation, the person depositing the tax is collecting the tax from the customers/ recipients of service and depositing the same with government in manner as provided in law. Appellants have themselves in their statements and throughout submitted that they were not depositing the taxes for the reason of financial hardship and had been rotating the amounts for their commercial gain. If the case of appellants was of only delayed payment of tax simplicitor, they should not crave for dropping the demands on ground of limitation instead should have paid the amount to the government.
iii. Their submission that nonpayment/ short payment of tax due to financial hardship is without any substance and merits, as these amounts have been collected by them from their customers as tax. Such a plea has been rejected ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 15 by the tribunal not only in the case of Appellants but also in case of International Security Academy P Ltd Vs CCE Chennai [2006 (1) STR 289 (T- Chennai)] iv. Gujarat High Court has in following case held that penalties are impossible even if the amounts are deposited prior to issuance of show cause notice. Thus the plea of voluntary deposit is also devoid of merits.
a. IWI Crogenic Vaporisation System (I) P Ltd Vs CCE & ST Vadodra II [2017 (47) STR 209 (Guj)] b. Indsur Global Ltd Vs Addl Commissioner of Service Tax Vadodra [2015 (38) STR 14 (Guj)] v. Delhi high court has in case of Bajaj Travels ltd Vs Commissioner of Service Tax [2012 (25) STR 417 (Del)], held in favour of simultaneous imposition of penalties under section 76 and 78 of the Finance Act, 1994 and this bench of tribunal in case of Master Marine Services P Ltd vs Commissioner of Service Tax Mumbai [2014 (35) STR 79 (T Mumbai).
vi. As per the directions contained in the order dated 20.07.2017, reconciliation of the payments made by the Appellants was undertaken by the revenue, and as per the report submitted by the ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 16 jurisdictional authorities, the outstanding service tax payments including interest amounts to Rs 54,95,06,237/-. Copy of this reconciliation report was also made available to the appellants. vii. Appellants have vide e-mail dated 13.11.2017 submitted certain payments made were not considered by the Jurisdictional Authorities. These details were also considered again by and vide report dated 20.11.2017, the said submissions have been rejected by the jurisdictional authorities.
viii. Non Cooperation and evasive/ delay tactics of the Appellant were also observed and recorded by the tribunal in its order No M/89963-89964/17/STB dated 28.09.2017. Tribunal has recorded "Appellant is not at all co-operative to examine its averment in miscellaneous applications.
Accordingly MA/92732 & 92733/15 are
dismissed.
ix. Thus the submission of the appellants that certain
more documents are to be examined is without any merits.
x. With respect to the challans submitted by the Appellants along with the written submissions made on 23/07/2018, the verification was again caused. On sample verification of the list ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 17 submitted it was found that these documents were the same documents in respect of which the verification was earlier caused and the payments made in these documents could not have been justified against the payment of service tax demanded.
6.0 We have considered the submissions made by both the Appellants and revenue. Undisputed fact is that Appellants are registered providers of taxable service under the category of "Security Agency Services." During the period under dispute, appellant were raising the invoices on their customers/ clients for the services rendered along with the applicable taxes. They were receiving the payments inclusive of the service tax amount but were not depositing the same. They were also not filing the ST-3 returns regularly as required by the Finance Act, 1994 read along with the Service Tax Rules, 1994. The plea advanced by the appellants for not depositing the tax is on account of financial hardship. If such plea is entertained, then not only the scheme of indirect taxation will be impacted but the entire mechanism of fair trade and commerce will collapse. Can really financial hardship, be the reason for holding on the money collected from the customer/ client be valid reason for nonpayment of tax due to the government. In the scheme of indirect taxation the tax ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 18 depositor is only a conduit for depositing the tax collected from the recipient of taxable service to the government. At the cost of repetition we emphasize that the amounts collected as tax from the customer/ client are not the money in the hand of tax payer but only held in trust by the said taxable person for the period and to be deposited with revenue in manner as prescribed by the taxing statue. By not depositing the said amounts in the manner as have been provided by law, Appellants have misappropriate the funds held by them in trust for their personal gain and should not be allowed the plea of financial hardship. Financial hardship cannot be reason to justify such misappropriation of the money which was never held as the money by the appellant. This tribunal has in case of International Security Academy P Ltd Vs CCE Chennai [2006 (1) STR 289 (T-Chennai)] considered and rejected such a plea. The relevant para of the said judgments are reproduced below:
"4. after giving careful consideration to the submissions, I find that the only reason stated by the assessee in their reply to the show cause notice, for delay of payments of service tax, is financial crisis. Financial crisis is a universal plea, which could be made by any assessee. If it is accepted as coming within the meaning of the expression "reasonable cause" under Section 80 ibid, the penal provisions of Sections 76 to 79 ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 19 of the Finance Act will be just dead letters. This cannot be the legislative intent. Hence financial hardships cannot be brought within the purview of the expression "reasonable cause" used in Section 80 of the Finance Act, 1994. What was found to be "reasonable cause" by the Tribunal's Larger Bench decision in the case of ETA Engineering Ltd. (supra) is not the one pleaded by the present assessee. Ld. Consultant has argued that, as in the case of penalties under the Central Excise Act, there should be no penalty on the ground of delay of payment of service tax prior to issuance of a show cause notice. I am unable to accept this proposition inasmuch as the penal provisions relating to service tax are couched in a language different from those relating to Central Excise Duty. The penalties have been correctly quantified by the original authority."
7.0 Similar View was expressed in case of Shayna Construction [2010 (262) E.L.T. 1006 (Tri.-Ahmd.)], and United Udyog [2015 (39) STR 148 (T-Kol)]. The observations of tribunal in case United Udyog are reproduced below:
"5. Heard both the sides and perused the records. Issue involved is whether financial hardship is a reasonable cause for exercising the powers by the adjudicating authority under Section 80 of the Act. The ld. Advocate has cited the case of Sunitha Shetty and Motor World (supra) in support of their claims that the discretion conferred on the adjudicating authority under Section 80 of the Act cannot be reviewed by the Commissioner (Appeals). I however find that the facts involved in the present appeal is not same as in case of the judgments cited by the appellant. On the other hand ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 20 ld. Commissioner (Appeals) has placed reliance on the case of Shayna Construction (supra), wherein the Tribunal held that delay of 187 days in filing the return and delayed payment of Service Tax ranging from 194 to 286 days was explained by the appellant due to his frequent visits on account of his mother's illness and that after return the tax could not be paid on account of financial difficulty, Tribunal held the benefit of the Section 80 of the Act cannot be extended to the appellant inasmuch as they were aware of their responsibility to file the return and deposit the tax in time. Similar view was taken by the Tribunal in case of Inma International Security Academy Pvt. Ltd. (supra). In view of the issue specifically covered by this Tribunal's decision in case of Shayna Construction and Inma International Security Pvt. Ltd. (supra) I uphold the contention of the ld. Commissioner (Appeals) that financial difficulty cannot be considered as reasonable cause for exercising the discretion provided under Section 80 for waiver of penalty under Section 76 by the adjudicating authority. Accordingly, the revisionary order passed by the Commissioner to file appeal against the said order cannot be faulted with. I also find that the appellant could not show that he could not pay the tax on account of bona fide mistakes or under the impression that tax was not payable due to interpretation, and therefore they could not show that there existed reasonable cause."
8.1 With regards to quantification of demand the verification was caused on the basis of the documents submitted by the Appellants. After considering all the documents submitted, and the demands confirmed jurisdictional officers have submitted the report as ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 21 follow vide their letter F No TOPS Reconciliation/89/V/MB/2017-Mumbai dated 30th October 2017.
"Consequent upon submission of additional information/ data/ details of Service Tax payments in respect of branches/ registrations of M/s Top Security Ltd. Vide assessee letters dated 05.10.2017, 06.10.2017 &
09.10.2017 (copy of letters enclosed for reference), this office again undertook reconciliation exercise and incorporated necessary changes in terms of additional submissions of the assessee and the records available in this office.
Accordingly, in continuation of this office letter of even no dated, please find enclosed herewith the reconciliation of service tax along with cesses, wherever applicable, payable and paid in respect of M/s Tops Security Limited, prepared as per the direction contained in your above referred letter.
The reconciliation is done on the basis of the following document received in the office of Hon'ble CESTAT, Mumbai on 04.08.2017 and further additional submissions dated 05.10.2017, 06.10.2017 & 09.10.2017, received in this office:-
a. Copies of the SCN's b. Copies of ST-3 return c. Copies of Taxpaying challans (TR-6/ GAR-7) d. Tax liability and payment worksheets prepared by and submitted by M/s Top Security Ltd.
Factors applied and documents considered in reconciliation:-
ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 22 (1) Where the CIN of the Challans are not matching with their amounts, the same have not been considered as valid challans.
(2) (Where the assessee has clearly marked, whether hand written or otherwise the challans for payment of the particular month/ period, the same has been considered provided the said payments are not declared/ adjusted/ claimed/ made against any other liabilities/ dues.
(3) In respect of some previous liabilities/ dues, the assessees has submitted and adjusted payments of such challans which are of the later dates ranging from days to years from the due date of the payment of the particular month.
Since, the assess, there self, have made submissions vide their worksheets, the same may be considered for payment against particular liabilities/ due provided the said payments are not declared/ adjusted/ claimed/ made against any other liabilities/ dues (4) The assessee, in their ST-3 returns, has declared some payments of Service Tax through CENVAT but the eligibility or otherwise of the same is not tested by the present jurisdictional office since the documents on the basis of which CENVAT is taken have not been received in this office from the old jurisdictions or otherwise."
8.2 On basis of the reconciliation undertaken, amounts as indicated in table ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 23 Table 3: Short Payment after Reconciliation.
S Appeal No Amount Net Short Interest Total
N Demanded Payment
o as per OIO after
Reconciliatio
n
1 ST/559/10-MUM 1,11,06,511 10,38,432 99,75,251 1,10,13,68
3
2 ST/334/12-MUM 22,59,509 0 16,20,776 16,20,776
3 ST/622/12-MUM 3,70,97,155 2,62,53,072 9,22,03,03 11,84,56,1
0 02
4 ST/723/12-MUM 8,42,39,230 2,50,57,256 13,82,40,4 16,32,97,7
69 25
5 ST/326/12-MUM 9,90,57,772 27,94,614 12,64,85,2 12,92,79,8
54 68
6 ST/63/11-MUM 56,30,458 27,67,515 73,28,752 1,00,96,26
7
7 ST/87575/15- 34,44,675 0 48,46,967 48,46,967
MUM
8 ST/342/10-MUM 2,29,98,633 53,42,799 2,62,94,73 3,16,37,53
3 2
9 ST/128/10-MUM 3,75,69,008 67,31,285 4,17,58,70 4,84,89,99
8 3
10 ST/564/10-MUM 1,45,65,041 0 3,07,67,32 3,07,67,32
5 5
Total 31,79,67,99 6,99,84,973 47,95,21,2 54,95,06,2
2 65 38
8.3 Appellants have vide their letter dated 14.11.2017,
again submitted documents which in their view should be taken up for reconciliation, though these documents have earlier been submitted also. Jurisdictional officers again considered these documents and have vide letter dated 20.11.2017 given report indicating why each document could not have considered for reconciliation. The document wise reasons submitted are mentioned in table below:
Table 4 Reasons for not accepting certain documents towards payments made Sl Amount Document Date Year Reason for No Denial ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 24 Appeal No ST/326/12-MUM 13-April-1 2,54,155 TR-6 04 2004-05 1
34 1322726 Bank Certificate 13-Dec-07 2006-07 2 35 1212366 Bank Certificate 13-Dec-07 2006-07 2 Appeal No ST/622/12-MUM Challan No 33 13,68,207 823472 20-Dec-07 2006-07 3 Challan No 34 1,02,56,799 823472 20-Dec-07 2007-08 3 Appeal No ST/63/11-MUM 1 59,674 TR-6 20-Apr-04 2004-05 4 27 88,509 TR-6 2-May-06 2006-07 5 33 1,23,634 TR-6 2-Nov-06 2006-07 5 35 1,44,473 TR-6 28-Dec-06 2006-07 5 36 1,47,281 TR-6 5-Feb-07 2006-07 5 52 1,72,595 TR-6 5-Nov-07 2006-07 5 Appeal No ST/723/12-MUM Challan No 40 46,15,579 823463 20-Dec-07 2006-07 3 41 12,26,158 Liability Reversed 30-Sep-07 2007-08 6 Challan No 42 12,56,815 823463 20-Dec-07 2007-08 3 43 1,17,018 Bank Statement 28-Dec-07 2007-08 10 44 9,38,168 Liability Reversed 31-Mar-07 2007-08 6 Appeal No ST/128/12-MUM 10 3,19,013 Bank Statement 7-May-05 2005-06 7 11 3,47,347 Bank Statement 7-June-05 2005-06 7 12 3,92,519 Bank Statement 7-Jul-05 2005-06 7 13 3,07,912 Bank Statement 28-Aug-05 2005-06 7 14 3,29,568 Bank Statement 20-Oct-05 2005-06 7 15 3,61,170 Bank Statement 20-Oct-05 2005-06 7 22 4,89,918 Bank Statement 23-May-06 2006-07 7 23 5,34,799 Bank Statement 30-Jun-06 2006-07 7 36 30,36,285 Bank Statement 7-Dec-07 2007-08 3 Appeal No ST/342/10-MUM 1 91,498 TR-6 7-Apr-04 2004-05 8 26 47 15 of 05-06 31-May-06 2006-07 9 30 3,20,824 77 2-Jun-07 2006-07 2 36 5,31,816 GAR-7 25-Aug-07 2006-07 3 37 2,65,121 GAR-7 25-Aug-07 2006-07 3 44 7,03,220 GAR-7 10-Nov-07 2007-08 3 Legend for Reasons for Denial 1 Proof of payment is not submitted by the party 2 The party has submitted a bank certificate but this is not a prescribed document evidencing payment of service tax and other dues. Moreover the certificate does not mention the liability period and proper accounting code 3 No records of this payment ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 25 4 The amount relates to the liability of the month of March 2004 and the assessee has claimed to adjust against the liability of the opening balance.
5 Challan has been prepared but never submitted to bank since there is no receiving stamp of the bank on challan. 6 The assessee ha himself reversed the liability in his accounts without showing any concrete reason thereof 7 The party has claimed the payment of Service tax on the basis of a bank statement but this is not a prescribed document evidencing payment of service tax and other dues. Moreover the it can be confirmed whether it is service tax, interest, penalty or any other dues and the period is also not mentioned.
8 The assessee has not mentioned the month for which the payment is being made, therefore payment for the month of April 2004 cannot be considered as claimed.
9 No explanation was tendered by the party why this amount be adjusted against the payment of Rs 1,66,765/-
10 This entry in Bank statement is on account of payment of Salary.
8.4 Thus it is seen that Revenue has fairly complied with the directions of the Tribunal in order dated 20th July 2017 by reconciling the payments made against the demands. Proper reasons has been recorded for not admitting certain payments. After such reconciliation also as on the date of reconciliation large amounts still need to be recovered from appellant.
9.1 From the facts as discussed above it is quite evident that appellants have been collecting the service tax from their customers/ clients but were not depositing the same with the exchequer. They were rotating the amounts collected as tax for their personal gains. They were also guilty of not filing the returns on due date to declare their tax liabilities and hence they have definitely suppressed the details of tax collected ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 26 and payable to the exchequer. Thus demands made invoking extended period as provided by proviso to section 73(1) is justifiable and for the same reasons appellants liable to penalty under Section 78 of the Finance Act, 1994. Further for various contraventions such as not payment of tax by the due date and delay in filing the returns for the period prior to 2008, simultaneous penalties under Section 76 also justified.
9.2 In the Appellants own case Delhi Bench has decided the same issue, on the basis of same investigation upholding the demands and penalties. The relevant text of the said order is reproduced below:
"3. During the investigation by DGCEI, it was revealed that the appellants were charging service tax from their customers for providing Security Agency Service and the amounts received by them were inclusive of service tax. However, the service tax paid by them was not commensurate with the amount received by them in respect of security services resulting in short payment as confirmed by the adjudicating authority which also found them guilty of willful misstatement/suppression of fact.
4. The appellants have contended that though the service provided by them was taxable, it was not appropriate to levy penalty because there was no mala fide intention on their part behind the short payment/delayed payment for which there was reasonable cause inasmuch as due to downfall in operations of the company, they suffered severe financial hardship which disabled them from paying impugned ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 27 service tax and they had been submitting their ST-3 returns regularly. They also pleaded for the benefit of reduced 25% of the mandatory equal penalty in terms of proviso to Section 78 of Finance Act.
5. The ld. AR stated that the appellants deliberately did not pay the service tax due in spite of having collected it and their appeals need to be dismissed.
6. We have considered the submissions. It is seen that the appellants have not denied that the impugned service tax was leviable and therefore with the consent of AR we take up the appeals waiving requirement of pre-deposit. They have been collecting service tax as part of gross amount charged and therefore non-deposit thereof on the ground of financial crunch is totally unacceptable. Financial crunch in no circumstance can justify non- deposit of service tax collected. Obviously thus there is not a great deal of discussion required to conclude that the appellants deliberately short paid the service tax due and the impugned order does not suffer from any appealable infirmity on merit. The appellants during the hearing have pleaded that for penalty under Section 78 the benefit of payment of 25% of the mandatory equal penalty as per proviso to Section 78 of the Finance Act should be given to them as the same had not been done in the impugned order. In this regard, we find that the Gujarat High Court in the case of CCE, Ahmedabad v. Ratnamani Metals Ltd. - 2013-TIOL-1124-HC-Ahd-CX = 2013 (296) E.L.T. 327 (Guj.) has held as under :
"At no stage, either in the Order-in-Original or in the order of Commissioner (Appeals), the assessee respondent has been given the benefit of payment of reduced penalty - Court has followed a consistent view that the assessee is required to be given the option by the adjudicating ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 28 authority where he is asked to pay a duty demand with interest and 25% of penalty within 30 days from the date of adjudication of the order and in such case, he would be liable to pay only 25% of the penalty - whenever such option had not been given, the remand had been made to the concerned authorities and the period of 30 days is being considered, if in case option is not given earlier, from the date of availing such option - since no option was given, the Tribunal can award such an option to the assessee."
7. In the light of the foregoing, we do not find any merit in the appeals except to the extent that the benefit of 25% of mandatory equal penalty under Section 78 ibid is required to be extended to the appellants. Accordingly the appeals Nos. ST/55809/2013 and ST/55810/2013 relating to Show Cause Notices dated 10-4-2011 and 20- 10-2011 are dismissed and Appeal No. 55715/2013 relating to the Show Cause Notice dated 20-10-2009 is partially allowed only to the extent that the penalty of Rs. 8,15,44,386/- imposed under Section 78 of Finance Act, 1994 will be reduced to 25% of the said amount provided the service tax and interest are paid within 30 days from the date of communication of this order and the said reduced penalty 25% of 8,15,44,386/- is also paid within the said time i.e. 30 days from the date of communication of this order."
9.3 Hon'ble Delhi High Court has even denied the benefit of 25% penalty extended by the Delhi Bench. The relevant text of the decision of the Delhi High Court, in case of appellants reported at 2016 (41) S.T.R. 612 (Del.) ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 29 "21. To round up the discussion of the case law on Section 11AC of the CE Act, the pre-dominant judicial view as evidenced by the decisions of the High Courts of Bombay, Allahabad and this Court is that, notwithstanding the circular requiring an adjudicating authority to indicate in the adjudication order the option available to an assessee of paying reduced penalty, that option cannot be made available at the appellate stage by permitting the assessee to pay the reduced penalty within 30 days of the order of the appellate authority.
22. As far as Section 78(1) read with Section 83 of the Finance Act, 1994 is concerned, apart from the fact that Section 11AC of the CE Act is not ipso facto applicable, the circular of the C.B.E. & C. issued in the context of that provision requiring the adjudicating authority to mandatorily state in the adjudication order the availability of the option of payment of reduced penalty, is also not applicable. In other words, an adjudication order levying penalty under Section 78(1) of the Finance Act, 1994 does not have to mandatorily spell out the option available to an assessee of payment of reduced penalty under the second proviso thereto. The failure to make such mention neither renders the adjudication order bad in law nor permits an appellate authority to give such an option at the appellate stage.
23. It appears to the Court that the very object of extending to an assessee the option of availing the benefit of payment of reduced penalty in terms of the second proviso to Section 78(1) of the Finance Act, 1994 was to provide an incentive for prompt payment of the service tax and interest that is due. When an assessee does not wish to contest the service tax liability or even when it wishes to contest such liability, but is prepared to ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 30 pay upfront the service tax and interest without prejudice to its rights and contentions, the statute provides an option of payment of reduced penalty to the extent of 25% of the service tax. This is, of course, subject to payment of not only the service tax and interest but also the reduced penalty within 30 days of the "communication of the order" of the adjudicating authority.
24. The SCN issued to an assessee invariably mentions the statutory provisions under which the demand for service tax, interest and penalty is proposed to be raised. There can be no question, therefore, of the assessee being unaware of the provisions of the statute. It is also very likely that in the adjudication proceedings the assessee, who invariably has an authorized representative to put across its case to the adjudicating authority, will make a reference to the statutory provisions. In particular if the submission relates to penalty it is unlikely that an assessee will not even refer to the relevant statutory provisions. The question of an Assessee, therefore, pleading ignorance of the law governing the adjudication proceedings cannot arise. There is no statutory requirement that the adjudication order itself should remind the Assessee of the option available of paying a reduced penalty in terms of the second and third proviso to Section 78(1) of the Finance Act, 1994.
25. When it comes to filing a further appeal, it is not unusual to find the covering letter accompanying the order of adjudication mentioning the statutory provision and the time period within which an assessee may, if it so chooses, file an appeal. However, even if the covering letter failed to mention it, an Assessee would not be able to plead ignorance of such provision and seek extension ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 31 of the period of limitation on that score. Even for the purposes of an appeal, the date on which an order is 'communicated' to the party who seeks to file the appeal is the crucial date. That period cannot get extended only because the appellant was not told of the statutory provision under which he can file an appeal.
26. The upshot of this discussion is that an appellate authority cannot at the appellate stage give the option to an assessee to pay the reduced penalty within a time that is beyond what is stipulated in the third proviso to Section 78(1) of the Finance Act, 1994. The statute is explicit. The second proviso states that the payment of the service tax and interest has to be paid within "paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax" and the third proviso states that the reduced penalty that has been determined also has to be paid "within the period of thirty days referred to" in the second proviso. The option to pay the reduced penalty comes to an end on the expiry of thirty days from the date of communication of the adjudication order. It is only where the service tax is enhanced by an appellate authority that, in terms of the proviso to Section 78(2) of the Finance Act, 1994, the time period for paying the reduced penalty at 25% of such enhanced service tax is computed from the date of communication of the appellate order.
27. In that view of the matter, in the instant case, the CESTAT could not have permitted the respondent to pay the reduced penalty amount in terms of the second proviso to Section 78(1) of the Finance Act, 1994 within thirty days from the date of the impugned order of the CESTAT. Such a direction was contrary to the third ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 32 proviso to Section 78(1) of the Finance Act, 1994 and therefore legally unsustainable."
9.4 In view of the said decision of Delhi High Court benefit of allowing the option to pay penalty to extent of 25% at the Appellate stage cannot be allowed. Accordingly we do not extend the said option in this case.
9.5 In view of the decisions referred to by the learned Authorized representative in his written submissions we are upholding the simultaneous imposition of penalties under section 76 for the period prior to 2008. We also uphold the penalties imposed under section 77 of the Finance Act, 1994.
9.6 Benefit of Section 80 to cannot be extended to the Appellants because no bonafide reason for invoking the said section has been put forth. The only reason for nonpayment of the tax collected and due was that the Appellants were facing financial hardship. The said argument has already been considered and rejected by the tribunal in cases referred in para 6 and para 7 supra. In the case of United Udyog, the bench has recorded the reason for not allowing the benefit of the Sunitha Shetty and Motor World case in similar circumstances. Accordingly the benefit claimed in terms ST/342,343,344,559,560,561/2010,63/2011,128,326,334,564,622,723,724,731,732/2012,87575/2015 33 of Section 80 too cannot be extended in the present case.
10. Thus we do not find any merits in any of the appeals and dismiss all the appeals upholding the orders of adjudicating authority.
(Pronounced in court on 28.9.2018) (Dr. D.M. Misra) (Sanjiv Srivastava) Member (Judicial) Member (Technical) tvu